The Informational Value of Corporate Responsibility Reporting: The Global Reporting Initiative in Finland
Helkala, Anniina (2015)
Kuvaus
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Tiivistelmä
The directive 2014/95/EU as regards to non-financial and diversity information by certain large undertakings and groups will bring the previously voluntary practice of corporate responsibility reporting under regulation in the European Union in 2017. The Global reporting initiative’s framework for corporate responsibility disclosures is the most recognized guideline for corporate responsibility reporting. With the endorsement from the new 2014/95/EU directive the GRI framework will most likely continue to grow as the most applied responsible reporting guideline.
In light of the new directive it is seen appropriate to investigate the informational value the GRI reporting guideline currently has for investors making investment decisions in the stock market. This thesis examines the effect releasing a first GRI report has on firm long-term information asymmetry measured by a liquidity variable, the turnover rate. The study is conducted on Finnish data and consists of 117 publicly listed companies from the Nasdaq OMX Helsinki Stock Exchange between 2001 and 2014. Furthermore, it is studied to what extent the GRI framework is recognized by companies listed in the exchange during the same timeframe.
The empirical methodology applies a fixed effects panel regression model where a binary GRI variable in addition to the control variables for firm size, stock price, leverage and profitability are regressed on share turnover rate. The empirical regression could not find any statistically significant evidence that initiating a GRI report in Finland between 2001 and 2014 affected firm turnover rate. In light of the results it cannot be supported that the GRI guideline inevitably lowers firm information asymmetry and that reports based on the guideline would inherently offer investors valuable information in the Nasdaq OMX Helsinki Stock Exchange. The possible reasons for this can stem from the fact that the disclosed GRI reports are not third-party verified for the accuracy of their contents leaving the framework vulnerable to corporate misuse.
In light of the new directive it is seen appropriate to investigate the informational value the GRI reporting guideline currently has for investors making investment decisions in the stock market. This thesis examines the effect releasing a first GRI report has on firm long-term information asymmetry measured by a liquidity variable, the turnover rate. The study is conducted on Finnish data and consists of 117 publicly listed companies from the Nasdaq OMX Helsinki Stock Exchange between 2001 and 2014. Furthermore, it is studied to what extent the GRI framework is recognized by companies listed in the exchange during the same timeframe.
The empirical methodology applies a fixed effects panel regression model where a binary GRI variable in addition to the control variables for firm size, stock price, leverage and profitability are regressed on share turnover rate. The empirical regression could not find any statistically significant evidence that initiating a GRI report in Finland between 2001 and 2014 affected firm turnover rate. In light of the results it cannot be supported that the GRI guideline inevitably lowers firm information asymmetry and that reports based on the guideline would inherently offer investors valuable information in the Nasdaq OMX Helsinki Stock Exchange. The possible reasons for this can stem from the fact that the disclosed GRI reports are not third-party verified for the accuracy of their contents leaving the framework vulnerable to corporate misuse.